US Treasury & Its Borrowing Chris Lamoureux Frequently, presenters must deliver material of a technical nature to an audience unfamiliar with the topic or vocabulary. The material may be complex or heavy with detail. To present technical material effectively, use the following guidelines from Dale Carnegie Training®.   Consider the amount of time available and prepare to organize your material. Narrow your topic. Divide your presentation into clear segments. Follow a logical progression. Maintain your focus throughout. Close the presentation with a summary, repetition of the key steps, or a logical conclusion. Keep your audience in mind at all times. For example, be sure data is clear and information is relevant. Keep the level of detail and vocabulary appropriate for the audience. Use visuals to support key points or steps. Keep alert to the needs of your listeners, and you will have a more receptive audience. Fixed Income 2. The Fed and the Treasury 11/9/2018 Copyright 1996-98 © Lamfin, Inc.

Fixed Income 2. The Fed and the Treasury The US Treasury The world’s largest borrower is the US Treasury. The structure of its debt is an important part of the fixed-income landscape. Furthermore, Treasury debt is important in developing an understanding of credit conditions because it is default—free, and available in a very wide range of maturities. The Fed serves as the Treasury’s bank and agent in the capital markets. Fixed Income 2. The Fed and the Treasury 11/9/2018

The Treasury & Supply – Demand Effects There is evidence that the Treasury’s borrowing plans affect interest rates—across the yield curve. The US budget deficit summarizes Treasury borrowing needs. Many blamed the high interest rates in the 80’s on a large US government deficit, and this became an important political issue. Also, in 2001, the Treasury announced that it was discontinuing its 30-Year bonds, and the prices on these securities shot up dramatically. Fixed Income 2. The Fed and the Treasury 11/9/2018

The Treasury & Benchmarks Since the demise of the 30-Year T-Bond, the question of an appropriate benchmark has become more important. Fixed Income 2. The Fed and the Treasury 11/9/2018

Fixed Income 2. The Fed and the Treasury Treasury Facts The primary market is a uniform-price auction, with scheduled (very predictable) auctions. 22 Primary Dealers play active role. Securities trade on when-issued basis prior to issuance. Secondary market very liquid. Strips are a primitive form of financial engineering. Most trading takes place in on-the-run issues. Fixed Income 2. The Fed and the Treasury 11/9/2018